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IBG Join Venture & Toothpaste Business Plan Research Paper

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Updated: Jul 29th, 2022

Executive Summary

A report on the formation of a joint venture between IBG Corporation and Amor Dental Care is given here. The new venture will be known as IBG Amor Oral Care. The purpose of the venture is to develop and market a new brand of toothpaste. The toothpaste will contain a unique whitening agent called Chemical X. The patent for the chemical will be sold to the new venture. The venture will also develop and manufacture other oral care products in the future.

Introduction

IBG Corporation is a large national fast moving consumer goods company operating in the United States. The main areas of business of the company include toiletries, cosmetics and perfumes. Toiletries include soaps, shampoos, body and hand wash liquids there are separate products targeted at both men and women. The company does not have a strong oral care market and currently has only one product namely different varieties of toothbrush.

The company has yet to venture into the highly competitive toothpaste market because of the lack of a good product that can compete with other huge companies that includes multinationals like Colgate Palmolive, Proctor & Gamble and Unilever. Even otherwise IBG operates in a highly competitive market competing with the above mentioned companies.

An affiliate of the company named IBG Research has recently made a breakthrough which could be a significant factor for a successful entry into the toothpaste segment. The product named Chemical X has found to have significant whitening properties which can make an impact in the toothpaste market. The company has till now, fought shy of entering this segment, but Chemical X could change that and IBG could enter into it in a big way. The company is planning to purchase the patent from its affiliate and use the product in toothpastes it plans to manufacture. This paper is a feasibility study of the proposal so that it may present its findings before the nest investor meeting.

Company and joint venture history

IBG Corporation, the parent company was started in 1936 by two brothers named Samuel and Philip Masters. The original factory was a small garage behind their home in Ada, Michigan. Their first product was a shampoo that was sold by them personally. Samuel was in charge of production and his brother in charge of marketing. They started supplying their product in small stores in and around Ada. Soon the quality of the product caught the attention of the public and demand began to grow. They soon ventured into other products and started a proper manufacturing plant on the outskirts of Ada. The company reached the million dollar mark in 1950 and its turnover touched 1 billion by 1995.

The current group turnover of the company is 2.5 billion USD. The company has a separate research division called IBG Research which independently conducts research on fast moving consumer goods. This company sells its research products to IBG Corporation, but has the right to sell it to other companies also. IBG Corporation now plans to buy the patent rights for Chemical X and market a range of toothpastes with this chemical as one of the primary ingredient. Due its lack of expertise in the toothpaste field it plans to tie up with another smaller company called Amor Dental Care. Amor focuses on premium dental care products including toothpastes and is also a national player in this segment.

The joint venture

The Company plans to form a new entity called IBG Amor Oral Care headquartered in Ada itself. Talks have been going on with the directors of Amor and a preliminary agreement as to the formation of the company has been reached. The joint venture company named above will be privately held with 65% stock owned by IBG and the rest owned by Amor. It is proposed that the new venture be incorporated as a limited liability company.

Once approved in the investor meet (to be held during the last week of January 2009), the joint venture can be incorporated without delay. It is assumed that it can be done within a fortnight of the approval. In effect IBG Amor Oral Care will become a reality by the 15th of February 2009. The company will have an initial capital of and a working capital of jointly financed by both the parent companies, the ratio being 65% by IBG and 35% by Amor.

The plant will use the existing manufacturing facility used by Amor. The plant and premises will be enlarged using the new capital and the required machinery will be installed. The same has been identified and will be installed within a month of ordering. The administrative office will be leased by IBG Corporation (to the joint venture) since the company has excess office space in its headquarters building. The joint venture will also have an office inside the city which will be leased from real estate companies. The patent right will be sold by IBG Corporation to IBG Amor Dental Care. Manufacturing of the chemical will be done initially at IBG Corporation plant.

Future projections: IBG Amor Dental Care will be able to commence manufacturing by the end of March 2009. The first year turnover is expected to be one and a half million USD. Turnover is expected to grow at the rate of 10% per annum and will touch two million by the end of five years. Once a market has been established in the United States, the company has plans to expand to other areas especially Asia. But this is expected only after a period of at least five years from start of operations.

Short-term and long-term objectives of IBG Amor

The short term-strategy of the venture will be to become a major player in the toothpaste segment within the next five years. This will be tough challenge due to the existence of high competition. There are many national and multi-national companies competing in this segment. An analysis of competitors will be given separately later in this paper. In the medium term the company plans to introduce other dental care products like mouthwash and mouth fresheners both of which will be using Chemical X. The long-term strategy of the company will be to international and become and compete with other major multi-nationals from around the world. The first entry will be planned in Asia, especially China and India. Both these countries account for nearly half of the world’s population.

Production plan

As mentioned earlier, IBG Amor will use the existing production facilities of Amor Dental Care, which is also located in Ada. Additions to plant, premises and machinery will also be done as required. Machinery and plant required for the toothpaste (the current equipment not being able to handle the expected production levels). Amor Dental Care will be continuing with their current line of products. Both Amor and IBG Corporation will not be permitted to use Chemical X for their own products and doing so will be considered a patent violation. In other words the product will be owned by IBG Amor alone.

Sources of raw materials

The advantage of a joint venture with a toothpaste manufacturer is that raw material sourcing will not be a problem. The basic raw materials needed for the toothpaste are more or less common across all brands except for the patented or special ingredients if any. Hence the common raw materials will be sourced from the suppliers of Amor Dental Care. Chemical X will be manufacturer within the plants of IBG Corporation. The necessary machinery which has already been identified can be installed within two weeks of ordering. The whitening agent inside Chemical X is a plant derivative. The plant is extensively found growing wild in many Asian countries.

Only a small quantity is required for manufacture and hence sourcing the plants will not be a problem. Efforts at finding a commercial cultivator in Asia have begun. Suitable temperature, climate and soil environments are being scouted and if available, commercial production within the United States will be done. But as of now, the ready availability from Asia is sufficient to cover all raw material needs.

Top Management of IBG Amor Oral Care

IBG Amor Oral Care will be headed by a managing director reporting to the board of directors. The board will consist of ten members six of which will be from or nominated by IBG. The balance four will be from or deputed by Amor. There will be six departments headed by the vice-presidents. The departments at present are production (manufacturing), accounts and finance, investment, warehousing, quality assurance and sales and marketing. There will be a general manager who will in charge of among other things, sales, marketing and advertising. The Managing Director of the new company will be the present vice-president (sales and marketing) of IBG Corporation.

He is the son of one of the founders (Samuel) and is a qualified MBA. He has been vice president for the past six years. He has worked in similar organizations after passing out of business school and has worked as apprentice in all levels and all departments of IBG Corporation. He was responsible for the annual sales growth of 20% experienced by the company for the last three years. This 35 year old is also a diploma holder in mechanical engineering. Responsibilities include overall supervision of the organization, reporting to the board of directors, strategy creation with the help of departmental heads, and monitoring the progress of the company.

It is proposed that the production vice president will be chief manger of Amor’s manufacturing department who will be deputed to the post. He is a senior manger aged 48 years old. He has been with Amor for the last seven years and has previous experience working in manufacturing departments of P&G and Unilever. His expertise in the manufacture of toothpaste is high and is a chemical engineer by qualification. The responsibility of this post include overseeing manufacturing operations, quality maintenance and plant upkeep and maintenance.. The manger for sourcing raw materials will also work under him.

Vice presidents for warehousing, quality control and investment will be filled by competent people from outside. All of them will have the necessary experience and qualification for the job. They will also be under 45 years of age. Budgeting, managing cash flows, managing finance, and other general financial functions will be the responsibility of the accounts department. Administration will help in the general administration of the company and the day to day activities. Human resources department will be in charge of staffing, training, and maintaining staff morale. They will also be required to formulate adequate compensation plans including bonuses and other benefits.

In addition to the managing director, there will be general manager who will be in charge or marketing and sales. Se is at present the current vice-president of sales and marketing in IBG Corporation. She is also a MBA in marketing from a prestigious university. She had also worked as advertising manger in the UK division of Unilever for five years. She had another long stint with P&G and was in charge of sales and marketing for P&G Canada. She is 40 years of age and a seasoned campaigner who will be able to take up the challenge. She has been with IBG for the last four years. This could be the most challenging job in the new venture after the managing director.

Responsibilities include motivating sales people and seeing that targets are met. She will be in constant touch with the managing director who will take a personal interest in helping to the department. An organizational chart of the company is given in the operational strategy section of this paper.

Environmental analysis

It is essential that comprehensive analysis of the company’s environment be carried out. “Environmental analysis is the study of the organizational environment to pinpoint environmental factors that can significantly influence organizational operations.” (Kotelnikov).

A graphical representation of the various factors in the environment is given below.

Representation of the various factors

It can be seen that it is very complex and also that it is just not the competition and demand that will affect the performance of a company. There are methods like PEST analysis and SWOT analysis to understand the company’s position the market. The PEST analysis will be given below and the SWOT analysis under the section ‘Marketing Strategy’ later in the paper.

PEST Analysis

“A PEST analysis (also sometimes called STEP, STEEP or PESTLE analysis) looks at the external business environment.” (Marketing & Competitive Intelligence FAQ). The acronym is expanded as political, economical, socio-cultural, technical factors. Later on, two more letters ‘L’ and “E’ were added and PEST analysis is also known as PESTLE analysis. Those two letters stand for legal and environmental factors. Politically the United States is very stable whether it is the democrats or republicans who form the government. The United States never had a history of coups or civil wars till now (except for the civil war during the time of President Lincoln). The country has business freedom to a large extent. Labor laws are flexible and there is a lot of freedom for employers to hire and fire people trade.

Trade Unions are a relevant force in the country and can influence the decisions of the government to a certain extent. This is mainly regarding pay and other benefits to the employees. In such cases they may even have the power to call for strikes and cause work disruption and hence is more of an economic factor rather than a political one. Fundamental political threats come from terrorism rather than any other factors. Of course, lobby groups and other influential groups can cause political trouble in certain areas of businesses. But toothpaste being not a major issue will not be generally affected by political factors.

There have been some concerns regarding animal testing in the toothpaste industry, but both IBG and Amor do not indulge in such practices. Economically, the United States is facing a probable downturn. The war on terror and the attack on Iraq and Afghanistan are some of the reasons for the economic slowdown. The emergence of some developing countries like China is also a drain on the economy of the country. The economy is generally going slow and many of the businesses are facing financial problems. There is a lot off downsizing and layoffs going on many areas of business. But toothpaste being an essential and low value item is not affected by slow economic growth. With regard to social and cultural issues also there would be no problem. A majority of residents will be using toothpaste (ingrained in their culture).

Moreover a toothpaste is a non-controversial item and hence would not face any problems in this area either. Technology might be the most problematic of the whole lot. Even though it is a low tech item, the addition of Chemical X has given a technological edge over competitors. There is nothing to prevent other huge corporation to try and develop rival product having same benefits (whitening) or something unique altogether. Legally also, both companies are law abiding. No animal testing is done and hence legal problems with regard to cruelty will not arise. As mentioned earlier, Chemical X is plant based which will be proved during clinical trial (now going on). Hence environmental pollution issues will not be there. On the macro environmental outlook the launch is quite safe apart from competition.

Industry Analysis

The toothpaste industry in the country is saturated. A very high level of usage indicates that there is not much hope in increasing the market size. Almost every one uses toothpastes for cleaning the teeth. This is mentioned because other methods of cleaning are seen in many developing and under developed countries. For example villagers in India use burnt rice husks and the twig/leaf of some trees for their daily cleaning.

Educating such people about the benefits of using toothpaste could make them change their habits. Hence in such markets, there is scope for expansion. The only option in this case is to share the market. In other words IBG Amor will have to capture the market of other brands which can be quite challenging task for the managing director and the general manager. This will need careful planning and the formulation of an effective market entry. Both these are given in later sections of this paper.

Competition analysis

Even though there are a lot brands of toothpaste in the market, a few brands dominate the industry. On analyzing the market the following brands are popular and will be the main competitors. The leading brands are Arm & Hammer, Colgate, Aquafresh (Glaxo) and Crest (P&G). The following brands, once very popular has fallen behind in popularity, but still holds a reasonable share in the market. They include Ipana and Gleem (P&G) and Pepsodent (Unilever). It is estimated that the above brands have an 85% share of the toothpaste market. (US Toothpaste market, 2003). It is against these brands that IBG Amor will have to compete. It can be seen that even though there are a lot of companies who market toothpaste in the country, the market is dominated by the above mentioned brands.

Marketing strategy

Company Analysis: The joint venture between IBG Corporation and Amor Dental Care called IBG Amor Oral Care has been explained in detail already. Once approved in the investor meet, the company will be able to be incorporated by the middle of February 2009.

SWOT Analysis

Strengths

The strongest point in favor of the new venture is Chemical X. Though other brands have whitening agents, it is estimated that they use bleaching agents for this purpose. Chemical X is a plant derivative that has the ability to remove stains (tobacco, food coloring etc) thereby bringing back the original whiteness of teeth. The Amor brands are well accepted in the premium toothpaste segment. They are also known for their protective and polishing properties. IBG Corporation has many brands known for their quality, though not in the toothpaste segment. IBG Research has a well established R&D facility.

Both IBG and Amor are strong, professionally run corporations. Both companies are also recognized by the media and the public as respected corporate citizens of the country. This venture will also create a synergy of the independent strengths of the company.

Weaknesses

IBG Corporation has no presence in the toothpaste segment. Amor brands are more visible in the premium market. High competition exists and the market is saturated. Gaining market share is possible only by capturing the share held by other brands.

Opportunity

Capitalizing on the whitening properties is the biggest opportunity for success of the product. Many people visit dental care specialists to have their teeth whitened. This product will be a viable alternative to this both in terms of saving money and time. Poor dental habits of the public can also be capitalized.. Chemical X is not a formula developed product like those found in the pharmaceutical industry. It is a natural derivate. Hence in this period, where environmental concerns are of great interest, this will be advantageous for the country. It will also be possible to provide a source of income for many poor people in Asian countries. If the plant can be grown in the United States, it will be good for the farmers in the country also. This will be goof public relations for the company.

Threats

The biggest threat is the saturated and highly competitive market. There is also a possibility that competitors may develop a product with similar properties or even other unique properties. It should be noted that intellectual property rights are well protected in the US and hence there would be no threats from patent violations.

Entry Strategy

A good entry strategy is necessary for entering into a high competitive industry like the toothpaste business. Adequate and effective entry strategy will help firms to achieve increased sales, brand awareness and business stability even in tightly competitive business environment. Formulation of appropriate entry strategy involves the detailed analysis of potential competitors together with possible customers.

  • Unique selling point: Introduction of toothpaste with the peculiar feature of adding newly invented whitening chemicals will be a direct competitive advantage of the business.
  • Public Acceptability: Whitening content in tooth paste is always attracting customer groups, irrespective of its price.
  • Demand for the product: – Toothpaste is an inelastic demand product with long term existence. The product will be of long-term demand. Thus the establishment of company with this product is less risky.
  • Resources: -For launching the marketing of the newly product they can use the existing marketing ways of the toothbrush product. Organizational marketing and technical skills needed for the new product can be met with the experienced existing employees.

Competition

Intense competition: – Impact from existing firms can be effectively overcome as the new whitening chemicals will be a positive advantage of them among other existing product. (Develop a market entry strategy).

Marketing plan

A traditional entry would entail high cost of promotion and advertisement. This will ultimately push the price of the product. The company is planning to have a direct marketing approach complimented by marginal advertising. It is proposed that a marketing tie up be had with AmDirect which is a multilevel direct marketing company. The company is quite popular and follows the same marketing policy of Amway/Quickstar Corporations. The company has an extensive dealership base of nearly one million independent distributors. They do not have a dental care segment in their product portfolio. Their system will immediately bring us a customer base of all existing distributors of AmDirect, since they will start using our product once it becomes available to them. The word of mouth and direct marketing will be enough to promote the product.

Marketing Approach

The product will be sold in plastic tubes. Initially, the sizes would be 100 gms, 200 gms and 500 gms tubes. A sachet packet of 20 gms will also be available so that customers can have a feel of the product. The color of the tube will be predominantly white with splashes of other colors. The final design will be left to an outside agency specializing in product design.

Ancillary services: It is proposed that only the toothpaste will be introduced at present. Other ancillary products like mouth wash and freshener using Chemical X will be developed and introduced after the toothpaste has been well accepted by the public.

Pricing: the toothpaste will be priced to compete with Glister, the brand marketed by Amway/Quickstar Corporation. The focus will be a concentrated product which will last longer than standard brands available.

Distribution: As mentioned above, distribution will be through the independent distributors of AmDirect. Preliminary talks are going on with the company and a it is hoped that a satisfactory agreement will be reached.

Advertising and promotion: Only marginal advertising to create an awareness and availability will be done. The main promotion will be through the distributors of AmDirect. Direct marketing (DM) is a growing industry in the country and will help promote the product in a saturated market. “DM-driven sales are forecasted to grow at 6.5 percent, to $2.064 trillion.” (Direct marketing’s growth rate to cushion cooling US economy, 2006).

Customer segment: Toothpaste is a daily use product used by almost every household in the country. Even though priced high, its concentrated formula will make the product last longer (using smaller quantity) and hence economical. The customer segment will the all the persons who can be approached by using direct marketing techniques.

Sales Forecast

Forecasting of sales of the product is necessary for deciding the maximum quantity level that has to produce. Overproduction and under production are equally important problems in business. Overproduction will cause lapse of valuable resources without benefits. On the other hand reduced or limited production lapse the chance of exploiting customer demand in time. For fixing the sales target various factors required to undertake. The plant capacity, financial resources etc will affect the future sales.

In a business emphasis is needed to sell the product to increase profit. In order to ensure return of cost with adequate profit minimum sales target has to be fixed.

Market size and market growth

Focusing on advertising the company plans to attain minimum 15 % annual market growth with medium market size. By keeping the balance of the three components, company profits, customer wants, and society’s interest the product should attain the targeted market growth.

Proposed sales plan or market share

The following is the proposed sales plan of IBG AMRO Company:

Sales Budget of IBG AMRO Company

PARTICULARS AMOUNT
Elements of cost of production:

Materials :

Component A :3765* 20 = 75300
Component B: 4925 * 10 = 49250
Component C: 1570 *30 = 47100
Component D: 6945 * 12 = 83340
Component E: 935 *100 = 93500
Total materials
Labor :

Machining : 40* 10* 1035 = 41400
Assembling : 6 *8* 1035 = 49680
Finishing :3*5*1035 = 15525
Total Labor

Prime cost

Add: Factory Overheads

Machining : 200000
Assembling ; 150000
Finishing : 100000
Total : 450000
Add: variable overheads ( 10 % of direct labor costs ) 10660
Total factory overheads

Works cost

Add; Admn. Overheads : 100000
Depreciation
Machine X : 40000
Machine Y :35000
Machine Z : 25000
Total : 100000

Total Admn. Expenses

Cost of production

Less; Estimated Closing Stock ;

Cost of Goods sold

Add; Selling overheads :
Fixed : 50000
Variable : 300000
Total selling overheads

Cost of sales

Add; estimated profit :
(20 %)

Sales ;

348490

106605

455095

460660

915755

200000

1115755

115800

999955

350000

1349955

270045

1620000

Industry trends

The tooth paste industry showing booming trend of whitening tooth pastes. As per the market survey of toothpaste companies it is stated that 73 % of the consumers take their tooth paste choice on the basis of its whiteni9ng capability. Among this 67 % consumers believing that the attractiveness of one’s smile is important. (Wong, 2008).

Financial strategy

Source and use of funds

The fund requirement for starting the business the company should use the following financial sources:

Owned funds:- The retained earnings of the existing IBG company can profitably be invest in getting the patent and to start business venture with the Amro Limited formed for the manufacture of new product.

Share capital: – Share capital requirements of the new company IBG AMRO is undertaken by the existing companies, IBG and AMRO on proportions of 65 % and 35 % respectively.

Sources of capital

Only equity shares should be issued by the new company. The equity shares will be purchased by the existing companies IBG and AMRO on percentage basis. The retained earnings of the existing companies also should be employed in setting up the new business.

Uses of the capital

The investment of procured capital will be done in following fields;

  1. For purchasing the patent
  2. For the establishment of plant and machinery.
  3. For getting license and to meet other legal formalities.
  4. For advertising and promotion costs
  5. For marketing the product.

Working capital

For carrying out the day to day activities the company should borrow from financial institutions and creditors. Both long term and short term loans should be used by firms for meeting its current liabilities.

Life-Cycle financing

As a part of its lifecycle finance the company should maintain adequate amount of retained earnings from its annual net profit. For meeting future liabilities, provisions for debtors and depreciation fund also should be maintained from its annual profit.

Valuation

Estimated cash flow statement of IBG AMOR for 5 years.

Particulars First year Second Year Third Year Fourth Year Fifth Year
Cash receipts:
Cash in hand at the beginning
Sales receipts:-
On Cash : 1250000
On Credit: 370000Less: VAT (13 %)Net sales

Share Capital Introduced:-

Long term loans

Short term loans

Total

Cash payments:

For purchasing the patent
For the establishment of plant and machinery.
For getting license and to meet other legal formalities.
For advertising and promotion costs
For marketing the product.

For production process

For salaries and wages

For repayment of loans and interest charges

Total

Net Cash flow

– – – –

1620000

(210600)

1409400

800000

500000

200000

2909400

250000

700000

105000

150000

200000

1115755

350000

2870755

38645

38645

1850000

240500

1609500

1648145

1175000

365000

150000

1690000

– 41855

– 41855

1950000

253500

1696500

50000

1704645

1195000

375000

150000

1720000

– 15355

– 15355

2200000

286000

1914000

1898645

1205000

380000

160000

1745000

153645

153645

2400000

312000

2088000

2241645

1225000

410000

185000

1820000

421645

Organizational Strategy

It is seen that this company wishes to enter into a Partnership Agreement with a leading Fast Moving Consumer Goods manufacturer (FMCG), who are presently in the business of manufacturing and marketing premium tooth paste in the market. The partnerships could be seen either in terms of Tooth paste X, being marketed separately by this company, or it could alternately, be seen in terms of accepting Tooth paste X , being marketing along with other tooth paste formulations and products of this Company. It is seen that since Tooth paste X is relatively unknown, it needs to be promoted and reinforced strongly among the judges and invitees who have come to grace the occasion of formal launching of Toothpaste X.

It is also seen that this company is not directly manufacturing, or marketing this product but is doing so through its associate or partner, who are established tooth paste manufacturers and marketers of branded tooth paste.

First of all, the scope of the Company’s rights and privileges in terms of its covenant with its trading partner needs to be examined – whether it would license the patent to the producing company for a royalty, and also claim profits arising out of distribution and sale of Toothpaste X, or would it sell the patent (upon registration) to the new company.

In the event of licensing, the rights and benefits of the patent remain with the licensor and shall dwell back to them in the event of expiry of partnerships agreement, if for a fixed time period, upon the expiry of such period, or any other reason, as provided in Covenant between the hirer of the patent and the owner of patent, say for fixed number of years. If however, the patent is sold to the partnership business, the seller loses ownership rights since they now devolve on the new owners or purchase through the agreement of sale.

In this case we shall assume that IBG Amor is the new partnership company arising out of the unison of IBG and toothpaste X manufacturing and marketing company.

The organizational strategy to be pursued with regard to the new toothpaste with wonder chemical X could be seen in terms of the relative merits of this product. Why would a Brand loyal person switch over from his/her present Brand C to a relatively unknown and untested Brand X. This is logical question and needs to be answered in a coherent manner.

It is therefore, to be seen that Brand X needs to first establish itself in the market and command a market share. It is deemed that the partnership would have 65:35 shares in the new business with IBG holding 65% of holdings and the partnership holding the other 35%. Share.

As per the terms of agreement, profits and losses would be shared equally and the Directors of the new company would have equal representatives from both companies. Therefore, there would be a Board of Directors in the new Company, comprising of 6 directors of existing company, and 4 directors of the purchasing company. In total there would be 10 members on the Board of Directors, but the superintendence, control and management would vest with a Managing Director, who would be having a General Manager working under him.

All functional heads including production of toothpastes, accounting for toothpaste, and other heads would also be responsible to the General Manager for their individual performance – for instance, the Production department of toothpastes would have the Research and Development activities concerned with the new formulations and also how usage of Chemical X could be further enhanced for the benefit of customer and clients , including chemical formulations, etc.

Organization Chart of toothpaste Manufacturing Company.
Organization Chart of toothpaste Manufacturing Company.

It is seen that in the case of a manufacturing organization like this, the functional executive need to perform well since the sustenance and growth of the org. depends upon these crucial aspects, especially production and selling functions. Production again is dependent upon availability of raw materials, labor and overhead absorption.

Should there be shortage of raw materials, it could affect production, sales, profits and of course, return of investments to partners.

Again production needs to be well planned, since management needs to have prior knowledge and expertise regarding materials needed to product one tonne of toothpaste. Nowadays, most of the advanced technologies in stores have switched to Just in time (JIT) methods, which obviate the need for holding long inventories in stores for long periods, thus locking up funds for inordinate periods. The production also needs to have alternative or emergency plans to resort to in the event of unexpected emergencies like long power cuts, Acts of Gods, etc. This is in order to ensure that production process does not get affected by external factors and production deadlines, and targets are met.

So, as far as organizational strategies are concerned, it is necessary that this Brand of Toothpaste C needs to get off to a good start. For this it is necessary to provide robust consumer awareness and product back up to the public. This could be done by organizing Dental camps and exhibitions, in which this dental tooth paste could be prominently displayed, and its utmost selling point (USP) be gained.

It is necessary that organizational strategies be initiated to study and suggest the following aspects :

  1. In today’s commercial world, empty words have neither significance nor relevance.
  2. Therefore it is essential that Peer Review of the claims relating to chemical X are conducted. Again a certified professional body, like the International Dental Health Association (IDHA) needs to review and certify the claims made by this company is genuine and true and there are no instances of falsehoods, or perjury involved.
  3. The aspect of peer review need to establish objectivity and professionalism in the production and sale of toothpastes, since it is a health product and needs the authentication of controlling or administering body of medical professionals
  4. The concern needs to enlist the active co-operation of famous dental surgeons and dentists in order to build a good base of trust and confidence among professional dental bodies and medical dental associations regarding the product and the need for them to recommend it to the consuming public through advertisements and during public/ private speeches on dental problems.
  5. It is seen that dental care needs to be taken early on in life, during the time children are asked to abstain for consuming too much of sweets, brush their teeth twice a day and also after every meal, and visit a dentist once every year, etc.
  6. The main strategy would be to interact with schools, educational institutions, clubs, hostels, etc, which houses large number of students, and distribute FREE SAMPLES for their use and feedback. The questionnaire circulated with the free samples would list out the need for oral cleanliness and freshness to avoid caries and dental decays. This needs to be practiced, over a period of time for children and young people, to be initiated into good oral practices and care of teeth by use of excellent tooth paste like this one.
  7. The advertisement backup and marketing thrust provided during the launch of this product needs to be phenomenal, in order to establish and retain awareness about the product among the potential consumers. It is also necessary that the marketing efforts need to be retained until the brand has established itself well.

Operation Strategies

The term operations strategy refers to action plans and procedures adopted by the company‘s sales administrators to capture the market and promote sales and marketing. It need to be understood that the business environment for toothpastes are very competitive since there are a plethora of manufacturers who vie each other for greater share of the consumer markets, In order to attract customs they indulge in discount sales, bulk volume discounts and other schemes, including prize vouchers and gift schemes in order to attract more and more customers to buy their toothpastes on a regular basis.

However, a discerning and prudent consumer includes a health conscious one, could see through these gimmicks and only demand quality for price. His concern is to get a quality product for investments and marketing tricks does not appeal to him much.

When it comes to operation strategy, there are a lot of pre- factors to be considered in terms of

  1. What are the objectives of this strategy in other words, what does it want to achieve?
  2. How could these be achieved, given the barriers to trade and competitive levels?
  3. What ideas or strategies could be used, to negate ill effects of competition?
  4. How the long term market standing of this toothpaste could be ensured?
  5. If pilot test results show positive results for this product line, and yet it ails on the big occasion , it would be necessary to withdraws the product from the market

Therefore it is prime necessity that this toothpaste must cater to needs of, at least a segment of society, in order to have a life run. Where product lines do not serve any use, or can be dispensed with easily, it would be difficult to promote it for a long time, even with gimmickry and massive promotions, since consumer acceptance is on the wane.

It could be said that being a new product, the company needs to substantiate the claims made by them in making the products “deliver the benefits its manufacturer promises.” (Parry, 2002, p. 41).

Thus it is imperative that in a competitive consumer marketing business, especially FMCG goods, the customer needs to get first preferential treatment, in order that the long term interests of the company’s products are not compromised over short or medium term business goals and objectives which may not be in terms of sustainability part of the business over a period of time.

Coming to the operations strategy, it is seen that the main objective of the new business would be to find a good market share and retain it over a period of time, say 5 years. This may be difficult but possible with a strong and effective sales force and marketing and advertisement backup that could offer product support and awareness. The main aspect is to deal with competitors, some of whom may have large market share like Colgate Palmolive, Ciba Geigy, etc.

Who have a very good reputation and have been in the market for many years. For a veritable David to challenge and win over Goliaths in the toothpaste world is what is in their asking. But it can be achieved provided this company keeps a cool head above its corporate shoulders and tackles one problem at time with objectivity and dispassion. There is definitely a growing need for an elite brand of toothpaste, especially among the youngsters and children who are more susceptible to teeth and gum reasons for very obvious reasons.

Therefore the operation strategy would need to consider a wider market and include young people, kids and children in their scope. This is because it is this age group that would be more prone to change tooth pastes bases on flavor, taste, color and packaging. By packing the toothpaste in attractive collapsible aluminum tubes with good secondary packing also, it is seen that there is a higher propensity to market and sell these products.

Again, the innovative attraction of Chemical X would be the USP of this product line. What the company needs to exploit is the brand name that is based on the wonder chemical X which, ACTUALLY shines the teeth while removing plague and tobacco stains. This USP would be the basis on which this product would be launched in a select and exclusive urban high class market in order to test and find out the consumer reactions to it.

The reactions to this test study would determine the timing and launch of the actual product throughout the Country. During the study, it is necessary that sample toothpastes are given to select respondents and they should be asked questions relating this to their present brands, and whether they would be willing to switch over to Toothpaste X, given an opportunity.

Taking into consideration all that has been said above it is ideal that the product be marketed using the direct marketing method mentioned above.

Conclusion

A report regarding the launching of a new joint venture called IBG Amor Oral Care has bee given above. This is a joint venture between IBG Corporation and Amor Dental Care, both belonging to Ada in Michigan. The development of the teeth whitening product called Chemical X is the reason why the new venture is planned. A new brand of toothpaste later followed by other oral care products will be manufactured and marketed by the company.

All these products will have Chemical X as one of its components. The market for the toothpaste market in USA is highly competitive and saturated. In spite of this situation, both the joint venture partners are confident that they can successfully market the toothpaste. The marketing plan which will be in the multi level model has been mentioned in the report. The report has been presented for approval by the investors.

References

Develop a market entry strategy. My Business. Web.

Direct marketing’s growth rate to cushion cooling US economy, DMA’s 2006 ‘power of direct marketing’ reports: Direct marketing sales: Very positive 2006, Solid 2007. (2006). DMA – Direct Marketing Association. Web.

Halal certification & Recognition. (2005). American Lion. Web.

Kotelnikov, Vadim. Strategic Analysis of the business environment. Business Model: Strategic Environment. Web.

Marketing & competitive intelligence FAQ. Business environmental (PEST) analysis: What is PEST (Political, Economic, Social & Technical) analysis? AWARE. What is Competitive Intelligence – a Brief Guide. Web.

Parry, Mark E. (2002). Strategic marketing management. McGraw Hill Professional. Web.

US toothpaste market. (2003). Oligopoly Watch. Web.

Wong, Elaine. (2008). P&G intros crest pro-health whitening toothpaste. BrandWeek. Web.

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IvyPanda. "IBG Join Venture & Toothpaste Business Plan." July 29, 2022. https://ivypanda.com/essays/ibg-join-venture-amp-toothpaste-business-plan/.

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IvyPanda. 2022. "IBG Join Venture & Toothpaste Business Plan." July 29, 2022. https://ivypanda.com/essays/ibg-join-venture-amp-toothpaste-business-plan/.

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